On 30 September 2014, K Ltd paid £140,000 to acquire 40% of the share capital of L Ltd (which became its associate). Draft for these two companies for the year to 30 September 2018 are as follows:
Statements of comprehensive income for the year to 30 September 2018.
Statements of financial position as at 30 September 2018.
Statement of changes in equity (retained earnings only) for the year to 30 September 2018.
The following information is also available:
(i) In the draft of K Ltd, the company’s investment in L Ltd has been recognised at cost and the dividend received from L Ltd has been recognised as income. These show the situation as it would be without application of the equity method, either in the year to 30 September 2018 or in previous years.
(ii) The retained earnings of L Ltd on 30 September 2014 were £100,000 and all of its assets and liabilities were carried at fair value. Neither company has issued any shares since that date.
(iii) During the year to 30 September 2018, K Ltd bought goods from L Ltd for £30,000 which had cost L Ltd £20,000. One-quarter of these goods were unsold by K Ltd at 30 September 2018.
Required:
Prepare the of K Ltd for the year to 30 September 2018.
